Why Dems are wrong on taxes

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The Bush administration's prophecy that its tax cuts would produce an economic recovery is coming true. The New York Times - whose editorial page tirelessly campaigns against any and all tax cuts and sees government as our salvation from virtually every problem - carried an item last Monday (Oct. 27) that must have caused the newspaper's editorial staff to suffer the journalistic equivalent of shock and awe.

In a front-page story about the fastest pace of economic growth in four years, there was this rare (for The Times) admission: "Most of that growth stemmed from a sharp rise in consumer spending, driven largely by a continuing boom in mortgage refinancing and checks that were mailed out as part of the recent tax cut." (emphasis mine)

Low interest rates and tax cuts are the twin strategies of the Bush administration for restoring the economy following the post-9/11 recession. They appear to be working.

Yet the Democratic presidential candidates are sticking to their predictable and tired themes of class warfare, dollar envy and economic stupidity as they clamor for eliminating the tax cuts and raising taxes again on "the rich."

In a Wall Street Journal essay last Monday (Oct. 27), Democratic presidential candidate Sen. Joseph Lieberman argued for his "tax reform " proposal, which is a convoluted and complicated revision of the already undecipherable tax code. Lieberman would raise rates for "the wealthiest" and lower them for the "middle class." Since "the rich" already pay the largest percentage of taxes, Lieberman's plan simply fuels the liberal notion that success deserves to be penalized and failure subsidized. Under Lieberman's plan, the top tax rate would increase 5 percentage points to 43.6 percent. This would send many wealthy (and some who just want to be wealthy, but aren't there yet) back to their tax shelters from which they are only now beginning to emerge. These shelters, along with a reluctance to sell stocks when they are high because of previously large capital gains taxes (also lowered under the Bush administration and Republican Congress), would again deprive government of revenue.

Republicans won't fully prevail on the economy as a political issue until they overcome their own addiction to spending. The newly minted New York Times conservative columnist David Brooks properly chastised those "reformist" Republicans who came into office as part of the "Gingrich revolution" in 1994 only to mimic the very people they replaced. In a column last Tuesday (Oct. 28), Brooks faults congressional Republicans for "the same pork barrel politics that marked the last decadent days of the Democratic majority."

Tax cuts are not only a winning political issue, they are a winning economic issue, but only if Republicans can again demonstrate thrift and personal responsibility instead of behaving like Democrat-lite.

Retirees, many of whom live mostly on dividends from investment income, are noticing the first uptick in those dividends in three years. Their dividend checks, as opposed to quarterly notices of losses that they had been receiving, are likely to persuade many of them that President Bush deserves a second term. The reduction in the capital gains tax is bringing many groundhogs out of their investment holes. Many stockholders are trading stocks (and paying taxes on profits) for the first time in several years. If there are no more terrorist attacks (a big if) between now and the 2004 election, and if the tax cuts continue to boost the recovery, Democrats will lose their central campaign issue and their major reason for asking voters to change leadership horses.

Democrats are wrong about taxes, but Republicans are wrong about spending. If Republicans can control themselves, their position as the majority party will be secure (and so will the economy) for years to come.

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